Firms scrambling to sell the sun

Nearly 150,000 acres of mostly barren desert east of the Coachella Valley have been labeled perfect for large solar projects that could produce thousands of megawatts of cleaner energy and — arguably more important for the region in this economy — thousands of well-paying jobs.

But the utility-scale projects — many of which have yet to be approved or built — are running into a considerable snag.

Already facing opposition over their impact on brush-laden land once home to prehistoric mammoths and American Indians — along with the desert tortoises, kit foxes and other desert species found there today — the projects may not be able to sell the renewable energy they would generate.

The state of California requires that utilities generate 33 percent of their power from renewable sources such as geothermal, solar and wind farms by 2020. But with about seven years remaining to meet the once-ambitious goal, utilities such as Southern California Edison are already confident they’ll have enough without all of the new eastern Riverside County solar plants.

The result is that utility-scale developers are scrambling for contracts, or power purchase agreements, to sell their electricity to the utilities — critical for putting together the millions or billions of dollars needed to finance the projects — even as various factors put pressure on the large-scale solar market.

First, utilities are offering to pay less per kilowatt and shifting to smaller projects under 20 megawatts. A megawatt can power about 750-1,000 homes. The eastern Riverside County solar projects would range from 50 megawatts to 1,000 megawatts.

Another key pressure point is the eventual sunsetting of the federal 30 percent income tax credit for renewable energy projects — a major draw for investors — that will drop to 10 percent for the large plants at the end of 2016.

Evidence of the precarious situation for large-scale solar developers seems to be inching toward a tipping point.

• The California Public Utilities Commission voted last week to reject one of two contracts between BrightSource Energy and Southern California Edison for the power from the proposed Rio Mesa solar project on private land near Blythe.

The commissioners said the rejected Rio Mesa power-purchase agreement and two other BrightSource-Edison contracts they voted down were overpriced.

The vote means Edison will be able to buy power from only one of the solar thermal project’s two soaring solar towers and thousands of encircling reflecting mirrors. BrightSource officials have said they will continue the permitting process for both units, while looking for another contract.

The company has pressured state officials to have the project approved by 2013, so it can meet its contract with Edison to have Rio Mesa on line in 2015.

It also faces a 2017 deadline for a second solar thermal project near Blythe, the 540-megawatt Sonoran West, which also has a contract with Edison approved by the PUC along with Rio Mesa.

The company has yet to begin the permitting process for the project.

• Two photovoltaic projects on federal land, both on a White House fast-track list for approval by year’s end, face similar problems.

A final environmental impact report is expected, possibly early next week, for San Diego-based EDF Renewable Energy’s 150-megawatt Desert Harvest project, near the tiny town of Desert Center, on Interstate 10 about 50 miles east of Indio. The company has neither a power-purchase agreement nor an interconnect agreement to link into the state’s grid.

Company officials said they are still negotiating for the contracts, but declined further comment.

NextEra Energy’s McCoy project, planned for up to 750 megawatts, is also closing in on a final environmental report but so far has only one power-purchase agreement for 250 megawatts.

“We will only build what we have a PPA for,” company spokesman Steve Stengel said. “A way to think about it is building in phases as we get PPAs for the project.”

Michael Picker, senior advisor to Gov. Brown for renewable energy facilities, sees the current situation as a sign the state’s aggressive renewable energy programs have been a little too successful.

“It’s a glut,” he said. “The utilities have contracts to provide 40 percent of their electricity from renewable sources. Now the utilities say, ‘Let’s wait and see what kind of problems arise with these.”

As of March, the California Public Utilities reported the state’s three main utilities — Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric — were producing 20.6 percent of their power from renewables.

But state law requires them to hit 25 percent by 2016, ahead of the 33 percent mandated for 2020, and utilities have loaded up on solar projects, mostly photovoltaic to meet the interim goal.

Projects already in line for a spot on the state’s electric grid could meet the 33 percent goal three times over, according to the California Independent System Operator, which manages a major portion of the state’s transmission lines.

Marc Ulrich, vice president of renewable and alternative power at Edison, confirmed the company is on target to meet its 33 percent renewable goal and is focused on signing contracts for smaller solar projects, 20 megawatts and under.

In addition to its Rio Mesa and McCoy contracts, the company has a second power-purchase agreement with NextEra for 250 megawatts of the 550-megawatt Desert Sunlight project now under construction near Desert Center.

“SCE’s plan is not to hold a large-scale solicitation in the 2012-2013 solicitation cycle,” Ulrich said.

The Imperial Irrigation District, which provides power for the eastern valley cites of La Quinta, Indio and Coachella, has also hit the 20 percent renewable benchmark and is working toward the 25 percent goal for 2016, said spokeswoman Marion Champion.

“We’re seeing a trend with developers to create smaller projects — ones under 50 megawatts,” she said. “They are locally permitted and they don’t have to go through the California Public Utilities Commission.”

PG&E has contracts in place for power from seven large-scale projects that have yet to come online, company spokesman Denny Boyle said.

1 COMMENT

Everybody is mostly good now until 2015- 2020. We missed the first and most lucrative business wave opportunity. We must hold on to our control area and regional self determination and get ready by way of strategic planning and business operation optimization to not be bypassed again by the second wave. Our poorest of the poor communities and IID ratepayers continue to be poorly represented by our elected representatives.